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Redistributing Gains from Globalisation

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  • Hartmut Egger
  • Udo Kreickemeier

Abstract

This paper analyses the effects of redistribution in a model of international trade with heterogeneous firms in which a fair-wage effort mechanism leads to firm-specific wage payments and involuntary unemployment. The redistribution scheme is financed by profit taxes and gives the same absolute lump-sum transfer to all workers. In this setting a higher tax rate reduces aggregate labour income and makes the income distribution more equal, with unemployment remaining unaffected. International trade increases aggregate income, income inequality and the unemployment rate, ceteris paribus. If, however, trade is accompanied by a suitably chosen increase in the profit tax rate, it is possible to achieve higher aggregate income and a more equal income distribution than in autarky, provided that the share of exporters is sufficiently high.

Suggested Citation

  • Hartmut Egger & Udo Kreickemeier, "undated". "Redistributing Gains from Globalisation," Discussion Papers 08/29, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:08/29
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Klein, Michael W. & Moser, Christoph & Urban, Dieter M., 2013. "Exporting, skills and wage inequality," Labour Economics, Elsevier, vol. 25(C), pages 76-85.
    2. repec:eee:inecon:v:108:y:2017:i:c:p:387-412 is not listed on IDEAS
    3. repec:ers:journl:v:xx:y:2017:i:3b:p:607-614 is not listed on IDEAS
    4. Gu, Grace Weishi & Malik, Samreen & Pozzoli, Dario & Rocha, Vera, 2016. "Trade Induced Skill Upgrading: Lessons from the Danish and Portuguese Experiences," IZA Discussion Papers 10035, Institute for the Study of Labor (IZA).
    5. Antràs, Pol & de Gortari, Alonso & Itskhoki, Oleg, 2017. "Globalization, inequality and welfare," Journal of International Economics, Elsevier, vol. 108(C), pages 387-412.
    6. repec:kap:iecepo:v:14:y:2017:i:2:d:10.1007_s10368-016-0371-1 is not listed on IDEAS
    7. Marco de Pinto, 2012. "Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis," MAGKS Papers on Economics 201210, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Marco de Pinto, 2015. "The Redistribution of Trade Gains When Income Inequality Matters," Economies, MDPI, Open Access Journal, vol. 3(4), pages 1-30, October.
    9. Lechthaler, Wolfgang & Mileva, Mariya, 2014. "Smoothing the adjustment to trade liberalization," Kiel Working Papers 1948, Kiel Institute for the World Economy (IfW).
    10. Marco Pinto, 2016. "Redistribution of Trade Gains in the Presence of Firm and Worker Heterogeneity," The World Economy, Wiley Blackwell, vol. 39(9), pages 1360-1383, September.
    11. Marco de Pinto, 2012. "Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis," FIW Working Paper series 092, FIW.
    12. Monica Correa-Lopez & George Choullarakis, 2012. "A Fair Wage Model of Unemployment with Inertia in Fairness Perceptions," Working Papers 1203, BBVA Bank, Economic Research Department.
    13. Zareh Asatryan & Sebastian Braun & Wolfgang Lechthaler & Mariya Mileva & Catia Montagna, 2014. "Compensating the losers of free trade," WWWforEurope Working Papers series 63, WWWforEurope.
    14. Yakita, Akira, 2014. "Involuntary unemployment and sustainability of bond-financed fiscal deficit," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 79-93.

    More about this item

    Keywords

    Redistribution; Heterogeneous Firms; Fair Wages; Wage Inequality; Unemployment; Trade Liberalisation;

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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